Australian construction marches on

Residential house construction kept the Australian PCI in positive territory over March

Residential house construction kept the Australian PCI in positive territory over March

Australia’s construction industry continued to grow in March, albeit at a slower rate than previous months, according to the latest Australian Performance of Construction Index (PCI).

The index, compiled by the Australian Industry Group (Ai Group) and Housing Industry Association (HIA), dropped by 1.9 points over March but remained in expansion at 51.2 points (readings above 50 indicate the sector is growing).

Positive growth across the whole sector was mainly due to the ongoing strength of residential house construction, which remains high despite a downturn in other areas.

"The continued strength of house building kept the overall construction sector in positive territory in March," Ai Group head of policy Dr Peter Burn says.

"With apartment activity trending down from historic highs, with commercial construction patchy at best, and with engineering construction dominated by the wind-down of mining and energy-related projects, growth is relying heavily on the housing sub-sector.

"And the outlook for the next few months is more of the same with house builders reporting strong growth in new orders, whereas for the rest of the sector new orders were down sharply in the month," Burn adds.

The HIA says the industry as a whole is coming down from an all-time high, and apartment, commercial and engineering construction will need to recover if expansion is to continue.

"Overall activity is still currently hovering at a very elevated level," HIA economist Geordan Murray says.

"We anticipate that this new phase of the cycle will be characterised by a marked contraction in apartment building, while an easing in detached house building is likely to be far more measured.

"With the positive contribution from the residential sector waning, if we are to see the Australian PCI remain in expansionary territory we will need to see a more broad-based recovery in non-residential construction," Murray says.